Shares in Scots transport giant tumble as US hurricanes whip up profit storm

Shares in Scots transport giant tumble as US hurricanes whip up profit storm

FIRSTGROUP has cited the impact of the devastating hurricanes across the Atlantic on its operations in Puerto Rico as it posted a near £2 million loss for the six months ended September 30, sending its shares tumbling by nearly seven per cent.

The bus and rail giant, which had made a statutory profit of £11.1m at the same stage last year, said the havoc caused by the hurricanes on its three contracts in Puerto Rico dented its bottom line by £6m. The Caribbean island was left devastated after Hurricane Maria struck in September, with reports emerging this week that its government is seeking $94m in US federal aid to boost its recovery.

FirstGroup said its difficulties in Puerto Rico, where it runs services as First Transit, and higher costs arising from driver shortages in the US offset solid trading performances and the benefits of favourable foreign exchange rates in the first half.

Its statutory operating profit dipped more than 26 per cent to £57.4 million. However chief executive Tim O’Toole noted the company’s statutory operating profit for the first half of last year had been boosted by a one-off gain on the sale of a Greyhound depot in the US.

While the company usually expects to face some challenges from hurricane season in the US, where its First Student operation is the country’s largest provider of student transport, Mr O’Toole said the impact of Hurricane Maria in Puerto Rico created a “noticeable difference in our Transit results.” He noted: “Puerto Rico is still in very difficult circumstances. Everyone’s lives have been upended, the economic life of the place has been upended, so it is still a work in progress. It is going to take a while for officials and the people there to work through things and for our operation to settle down.”

And he said the period had seen the “curious” situation of the company’s UK bus and rail operations boosting its US business.

“In this period it was a bit of a reversal – a better than expected performance in bus and rail in the UK helped us overcome the hurricanes in the States, which were fairly extraordinary this year,” he said.

Mr O’Toole acknowledged FirstGroup’s UK bus business was continuing to feel the weight of economic uncertainty, the rise of online shopping and road congestion. But he said the period had seen the company manage to push through some fare rises. This followed years of reductions designed to make its prices more competitive.

Asked about the possible effect on demand from the recent 0.25 per cent rise in interest rates, Mr O’Toole said he was aware it could influence “consumer views and expectations”. But he said the company would have to “just wait and see” adding that, if there is an impact, it would “adjust our operations accordingly”.

In UK rail, the company said first-half trading had been better than anticipated, with like for like passenger revenue rising 3.2 per cent, and cost efficiencies helping to boost margins.

The period saw FirstGroup commence operations in August on the South Western Railway (SWR) franchise, which it took over from Stagecoach following a successful bid with Hong Kong’s MTR Corporation in March.

Group revenue leapt 8.1 per cent to £2.77bn when the new franchise and favourable foreign exchange rates were taken into account. Excluding SWR, whose arrival marked a major coup for FirstGroup following the loss of the ScotRail franchise to Abellio, and the currency factor, group revenue was up 0.9 per cent.

Mr O’Toole pledged “massive increases in capacity” across all of its rail franchises – SWR, Great Western Railway and TransPennine Express - which he said would again illustrate the benefits that privately-run railways can bring to passengers.

FirstGroup has previously declared its intention to bid for the forthcoming West Coast and East Midlands rail franchises but Mr O’Toole signalled that the company would not over-extend itself.

“We’re preparing ourselves to put in a competitive bid [for West Coast] but one thing the recent past has taught us is we have got to stick to our very disciplined bidding, and not get carried away,” he said. “We have to make sure we only win franchises that we can deliver.”

Meanwhile, looking to the second half, Mr O’Toole said he expects FirstGroup to benefit from its “normal seasonal bias”, as well as its ongoing drive for cost efficiencies and the the impact of the SWR franchise. He added: “All in all I think we are really set up for the full year and the way cash came in makes us even more comfortable and confident in our full-year results.”

Comments

Comments & Moderation

Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.

Our Colleagues

Ipsoregulated

This website and associated newspapers adhere to the Independent Press Standards Organisation's Editors' Code of Practice. If you have a complaint about the editorial content which relates to inaccuracy or intrusion, then please contact the editor here. If you are dissatisfied with the response provided you can contact IPSO here